The Taiwan dollar fell to a three-day low on Friday and then recovered after suspected central bank intervention on what was otherwise a quiet trading session for Asian currencies. The Thai baht was surprisingly steady, little moved by a court ruling that banned exiled former Prime Minister Thaksin Shinawatra and his party from politics for five years.
Other Asian currencies were also little changed as markets waited for US jobs data later in the day that could help investors decide which way US rates might head next. The Taiwan dollar's decline was driven partly by the recent weakness of the Japanese yen. The yen spent Friday in a tight range near Thursday's three-month trough of 121.99 per dollar.
The Taiwan dollar fell to 33.107 per US dollar, losing half a percent from the day's high of 32.917, before the central bank was suspected of once again buying its currency. Friday's move took the currency further back from the previous session's three-month high of 32.783, making it give up some of the gains made since May 22, helped by central bank measures to defend the currency.
"We are seeing a slight change in their policy of driving down USD/TWD," one currency trader based in Hong Kong said. He said the central bank may have pushed up the currency too far. "I expect it to settle down a bit, in the 32.85-33.25 range."
Taiwan's central bank has in the past few weeks intervened to buy the Taiwan dollar, and is suspected of allowing a rise in short-term rates in order to discourage investors from using the low-yielding currency as a funding source for other investments. This week, it also urged domestic fund managers to offer more products in the local currency. Markets in Singapore and Thailand reopened after a holiday on Thursday and traders were a bit surprised by the baht's indifference to Wednesday's order by Thai judges that the Thai Rak Thai party should be disbanded for breaching election laws.
The baht reached 34.54 per dollar in onshore trade, barely changed from Wednesday's closing levels and just off the 9-1/2 year high struck earlier this month. One Bangkok-based trader thought the court's ruling was "good news" for both politics and financial markets. "I can see exporters waiting to sell above 34.65," the trader said. "But it depends on whether we see any serious reactions to this news."
One reason for the baht's steadiness was the variety of market views. The former opposition Democrat Party was absolved of any wrongdoing by the Thai court, which some analysts viewed as a positive development for the political scene. Others were wary of protests by Thaksin supporters.
"Purely from the market's perspective, the sparing of the Democrat Party from charges of electoral fraud has reduced the risks that the next elected government would be made up of inexperienced politicians from a coalition of small parties, within which there would have been sufficient room for the military to maintain significant political influence," analysts at UBS said in a note to clients.
But they said they would maintain a cautious view on the baht ahead of a September referendum on a new constitution and December general elections the military-appointed government has promised to hold.
HSBC strategist Richard Yetsenga was less optimistic on the baht. Thailand's political situation was still a mess, he said. "Baht appreciation still primarily relies on a very sizeable external surplus driven primarily by the trade account.